How to Value Work in Progress (WIP) in a Law Firm Insolvency

For insolvency practitioners dealing with distressed practices in the legal sector, one of the most complex and value-sensitive assets to assess is work in progress (WIP). Unlike tangible assets or even billed debts, WIP sits in a grey area between time recorded and realisable cash , and its true value is dependent on the quality of records, the strength of ongoing client relationships and the likelihood of success on contingency fee matters.

In the context of law firm insolvency, getting the WIP valuation right can materially influence realisations for creditors and the overall outcome of an appointment.

Understanding WIP in a distressed legal practice

WIP represents unbilled time and disbursements accumulated on active client matters. In solvent firms, WIP is typically converted into invoices and subsequently into cash flow. However, in insolvent or near-insolvent law firms, that conversion pathway is disrupted.

At this stage, insolvency practitioners must determine not just what has been recorded, but what is realistically recoverable. This is especially important across different practice area segments, where retainer structures and dispute risk can vary significantly.

Key principles in valuing WIP

Valuing WIP requires a layered approach combining financial analysis and legal judgment.

Quality of time recording – The starting point is the integrity of time entries. Poorly recorded or bulked time reduces enforceability. In contrast, detailed records increase the likelihood of realisation. Where records are incomplete or non-compliant, discounts are typically applied during valuation.

Stage of matter completion – The closer a matter is to completion, the more valuable its WIP. Matters at an early stage may require significant further work before billing, increasing uncertainty.

Billing arrangements and fee agreements – Fixed fees, conditional fee arrangements, and capped agreements all influence valuation. Contingent or success-based matters often carry lower immediate realisable value than hourly rate work.

Age analysis – Older WIP is generally less valuable. As time passes, the risk of non-recovery increases due to fading client recall or perceived delay in billing.

The role of due diligence in WIP valuation

Effective due diligence is essential before assigning any meaningful value to WIP. This includes reviewing files, billing histories, and client correspondence.

In many cases, due diligence also involves sampling files across departments to establish patterns of behaviour, such as habitual write-offs or inconsistent billing practices.

For insolvency practitioners, this process helps distinguish between nominal WIP and realistically realisable assets however, can also lead to lengthy delays and significant discounting.

The importance of acting early

From an insolvency practitioner’s perspective, one of the greatest risks is the speed at which the value of work in progress can erode once a law firm enters financial distress. Active matters may stall, fee earners may leave, and clients who lose confidence in the firm’s future may decide to instruct alternative solicitors.

As a result, timing is critical. Delays in implementing a WIP strategy can lead to:

• Reduced client engagement and retention
• Departure of key fee earners and loss of matter knowledge
• Increased file attrition and abandoned claims
• Lower settlement rates and compliance pressures
• Greater regulatory and compliance pressures
• Reduced interest or lower offers from acquiring firms

Taking early, proactive action is therefore essential. A structured review of files, combined with a carefully managed transfer or run-off strategy, can help preserve client relationships, protect asset value, and maximise returns for creditors.

The Recovery First model can be used to assist practitioners in the orderly completion of live client matters, ensuring full SRA compliance. Our process involves discreetly transferring, with client consent, a firm’s cases to multiple purchases on our panel of solicitors. The incoming firm works the matter through to conclusion, at which point an independent costs lawyer allocates the value recovered between all parties based on their input to the conclusion of the matter.

Rather than selling files in bulk at a significant discount our model is designed to preserve and recover as much value as possible, helping insolvency practitioners deliver improved returns for creditors.

How Recovery First assist?

Recovery First works alongside insolvency practitioners and other advisers to help maximise the value of work in progress held within distressed law firms. Our established and confidential service is designed to preserve asset value and achieve positive outcomes.

Our services include:

• WIP valuation and review – We help insolvency practitioners assess the potential value of WIP files across different areas, providing a realistic view of likely recoveries.
• Managed file transfer and run-off – Our team oversees the entire process, from file review through to the transfer of matters to carefully selected panel firms. This protects the integrity of the client’s case while maximising the value that can be realised from the files.
• Conditional and compliant process – We manage transfers discreetly and in accordance with regulatory requirements, reducing disruption for clients and minimising the risk of value erosion during the transition.

For insolvency practitioners dealing with distressed law firms, WIP is often one of the most significant assets. Recovery First provides a practical and proven route to unlocking that value, helping practitioners maximise recoveries while ensuring clients continue to receive appropriate legal representation.

If you would like to discuss how Recovery First can assist with the valuation and transfer of WIP files, please contact our team using the details below.